The Motley Fool Discussion Boards

Previous Page

Personal Finances / Buying or Selling a Home


Subject:  Re: Two Unorthodox Ways to Pay Off a Mortgage Ea Date:  8/3/2014  2:25 PM
Author:  Dwdonhoff Number:  127269 of 129285

Hi 2gifts,

First, you are missing the fact that all investments do not always go up, and so people do lose money as well as have gains on investments.
Not missing that... it's simply a different conversation. You're bringing up alternatives of risk, which is certainly important (even critical,) but when comparing financing sources (borrowing at the cost of interest, versus reallocating at the cost of lost gains,) one would have to equalize for risk in the first place.

Secondly, everyone does not have the same goal of always investing to make the most money possible. Some people, like me, are investing not with gains as the ultimate goal but with plans to spend that money on something such as college, retirement or maybe a trip around the world. I think, then, that you are missing the concept of "enough" in your thinking. If I need $3 million to reach all my goals comfortably, then having $4 million instead does not interest me
Time is Money, and vice versa.

If you only want to hit the $3M mark, then taking the safest, most efficient approach will get you there sooner. Perhaps you'll achieve net 'financial freedom' a decade earlier than if you took more risks or were less efficient.

As quoted in my email signature;
“Wealth is the ability to fully experience life.” <?I>
Henry David Thoreau

Thirdly, and the one that I find the most absurd, is that this seems to say that any time I use my dollars, whether from earnings, savings, investments, or a bank loan, I have "borrowed" it from somewhere,

Perhaps you are getting confused by unecessarily loading constraints or meanings to the term 'borrow.' If so, try thinking 'allocate' instead.

and so I am left wondering why you only apply that logic to purchases such as house or car when it seems that you're applying this to all money spent, and so that means, in your world and words, I seem to be borrowing from myself every time I spend a dollar whether that is on groceries, the electric bill, medical care, college, a house, or a car. And it is at this point that you have completely lost me.
You are absolutely correct, the idea that "every dollar spent comes at a cost" applies to far more than home & car purchases, indeed every purchase.

Of course, there are certain purchases that give us emotional value far greater than the costs of financing the dollar required to be spent. for example, if you're broke and you are offered 100% guaranteed-safe return on the next $300 you can come up with, *OR* you can pay a month's rent so you can sleep under a roof, most reasonable folks with take the physical safety at the expense of forfeiting 100% gains, no question. That doesn't negate the fact they're forfeiting a guaranteed-safe 100% gains.

Hope that's helpful, 2gifts.

To everyone else, this may be helpful to participate with intelligence & maturity;

To those who know who this refers to;

Dave Donhoff
Leverage Planner
Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us